Lies, damn lies and statistics. The Federal Reserve's preferred inflation index came out better than expected on Wednesday, September 30 at 2:30 p.m. (Paris time). The core PCE (excluding food and energy) came out at 3% over one year against 3.3% expected and Bitcoin immediately rose above $84,000.
However, one detail has escaped most of the headlines. The Bureau of Economic Analysis (BEA) changed the same day the way it calculates part of the index it publishes. After a summer spent under the threat of a rate hike, nuance matters. If the markets no longer believe in a rate hike in October, is it because prices are slowing down, or because the BEA has changed the way it counts them?
American inflation, the three adjustments of the BEA
The BEA scrutinizes its national accounts every year in September. The 2026 edition revises the data since January 2021 and this time includes three method changes, announced in June.
The most telling concerns portfolio management and investment advice. Until now, its price followed a producer price index (PPI) closely correlated to the stock market. A manager takes a percentage of the assets, so his costs rise with Wall Street without him working an extra hour. The old calculation counted a good part of this increase as inflation. The BEA now relies on employment in the sector to estimate the volume of services provided.
Two other positions pass on the billiard table. Legal services are abandoning a series of the consumer price index, considered too erratic, in favor of several detailed PPIs. Software now mixes the old index with PPIs from hosting, IT infrastructure and video game publishing.
How much does the revision of American inflation weigh?
The BEA has not published any estimates of the effect of these changes. RBC economists were counting on around 0.18 points less for annual core PCE, including 0.16 points for software alone, according to an analysis relayed by Investing.com. On this account, the July core PCE was expected to slide from 3.3% to 3.1% once recalculated. However, the forecasts had been based on the old thermometer.
The month of August is nothing spectacular. The BEA press release reports a price increase of 0.3% over one month and 0.2% excluding food and energy. Household spending jumped 0.9% while their savings rate slipped from 4.6% to 4.1%. The core PCE stands at 3% over one year, a full point above the Fed’s target.
Should we cry manipulation? Some American analysts have suggested this, without providing proof. Measuring management fees against the S&P 500 essentially amounts to measuring the stock market, and the corrections relate to positions that economists have long considered to be shaky.
Bitcoin facing recalibrated US inflation
With the old method, a stock market in good shape mechanically inflated inflation measured via management fees. For Bitcoin, the loop was penalizing: more inflation means more fears of rising rates, which weigh on assets without yield. RBC, however, only attributes a 0.03 point decline to this position, and the link between Wall Street and the index does not disappear with the stroke of a pen.
The Fed's calendar changes color. The central bank raised its rates by 25 basis points on September 16, to a range of 3.75% to 4%. Just last week, the markets gave more than 70% probability of a second increase on October 28. John Williams (New York Fed) ruled on September 29 that there was “no emergency”. The PCE has finished the job, since the CME's FedWatch tool only gives around a 35% chance of an increase in October.
Bitcoin takes advantage of this without getting carried away. Around 9:50 a.m. in New York, it was trading at $84,553, 8.8% more than at the end of August but still 26% less than a year earlier. A recalibrated thermometer does not change the price of the American household basket. Williams himself keeps a December surge up his sleeve.
